Friday, May 30, 2014

Cornelius Vanderbilt: Ferry Owner Turned Railroad King

Transportation is a viable mode of traveling from
one place to another. It allowed economies to grow. It allowed people to see
different places besides their home. The bigger your country, the more the mode
and more integrated the transportation should be. The United States is one
example of these big countries and during the 18th-century, many cash in on
this industry. Among of this transport tycoons is the competitive
"Commodore" Cornelius Vanderbilt.

"Commodore” Cornelius Vanderbilt (May 27,
1794 – January 4, 1877) lived his life as a great tycoon in the maritime, then
later, in the railroad industry, the two biggest transportation industries in
the US. He used his great entrepreneurial skills and ruthlessness to get to the
top of each ventures he took. He was criticized by some for his business
practices and was labelled a Robber Barons.However, some
admired him for his hardwork that made his life story a rag to riches story.
Nevertheless, it was hard doubt that Cornelius Vanderbilt is part of the first
batch of great businessmen in American History.

Cornelius Vanderbilt was born on May 27, 1794 in
Staten Island, New York. He came from a Dutch descent family of Cornelius
Vanderbilt and Phebe Hand. His family suffered hardship and poverty during his
childhood. Because of their condition, he lacked a formal form of education. By
the time he turned eleven years old, he began to help his father on their
family business, which was ferry service. At the age of sixteen, he decided he
wanted to start his own business.

He began his modest business with the help of
his entrepreneurial mind as well as cleverness. To start his own business, he
needed a source capital. To get the capital needed for his new business, the
young Cornelius Vanderbilt persuaded his mother to lend him a hundred dollars
in exchange for his labor on their farm. Eventually, he managed to finish the
work on the farm with the help of his friends and eventually got his $100 from
his mother. He used the money to construct a small sailing periauger or a boat
to start his own ferry business. With this single boat, Vanderbilt began to
provide a very satisfactory ferry service for passengers crossing from New York
to Staten Island and vice versa. Customers loved Vanderbilt’s service for his
honesty and high standard but simple services.

In 1812, the devastating Napoleonic War
reached America under the form of the War on 1812. From the breakout of war,
Vanderbilt received lucrative contracts from the United States Government
allowing him to expand his business. He was contracted to ferry provisions and
soldiers across various forts in the New York Harbor. By the time the war
ended, Vanderbilt earned a lot of wealth. This gave him the chance to purchase
a new and bigger schooner for his business. By 1817, his net worth amounted to
about $19,000 and earned him the nickname “Commodore”. Shockingly,
Vanderbilt made an unexpected decision afterwards.

Being a future minded person, the young ferry
entrepreneur decided to leave his business. The advent of the faster and more
efficient steamboats made Vanderbilt to rethink the future of his business. The
age of steamboats had arrived. His business, however, still relied heavily on
sail masts ships, which were slower than steam-powered boats. Moreover, because
steam-powered ships had lesser travel time, many passengers preferred it.
Predicting the future collapse of his business, he decided to leave the
industry; henceforth, he sold all his ships. He then moved to New Brunswick and
opened a new business. He and his wife, Sophie Johnson, decided to open a
tavern, named the Bellona House, which served as a resting place for travelers
heading and returning between New York and New Jersey.

To support further his family, he accepted a
job on a company of another ferry service owner, Thomas Gibbons. From his job,
he received a modest salary of $1,000 per year. Gibbons was operating on the
route of New York, New Brunswick, and New Jersey. Gibbons and Vanderbilt’s
relation proved to be very close. Gibbons placed Vanderbilt as a top manager
and a captain of one of his steamboats. Vanderbilt operated it on his best
capacity and earned praises from his passengers for his very satisfying
services.

The partners faced many problems during the
years between 1818 up to 1826. One obstacle they fought was against Aaron
Ogden. Ogden owned a license of monopoly on the trade route of New York City to
New Jersey that was started by Robert Fulton. Gibbons wanted to break the
monopoly to enter the lucrative route. On the state courts, Gibbons lose, but
when the Supreme Court decided on the case, Gibbons won and the monopoly was
removed.

In 1829, with Thomas Gibbon’s dead for three
years, Vanderbilt resigned from the ferry company, now ran by a relative of
Gibbons. Afterwards, he decided once again to start his own business. He used
his earnings to buy new ferries that would cater the needs of passengers
crossing New York and Peekskill. On that route, he faced competition from a
certain businessman namedDaniel
Drew. His competition with Drew would reveal Vanderbilt’s tenacious and
ruthless tendencies. Vanderbilt began to establish predatory pricing. He acted
viciously and mercilessly against his competitor. He cut his price so low that
it drained out the passengers from Drew’s ferries. This kicked out Drew from
the business allowing Vanderbilt to operate the route with no competitors.

After Drew, he then turned his sight to the
Hudson River Association that controlled the ferry trade in Albany. Again,
Vanderbilt slashed prices to have his opponent bleed out of passengers and
freights. The tactic worked for the second time. To save themselves from
demise, the Association paid Vanderbilt more than $40,000 to make him back away
from the route. The Commodore agreed and got the best of the Association and
turned his ferries on Long Island Sound, Boston, and to other places in
Connecticut. By 1834, Vanderbilt’s wealth amounted to $500,000 and became a
towering figure in the ferry business.

In 1848, a new chapter on the business career
of Vanderbilt opened. California gold rush was on and every prospector in the
country wanted to go to the west to find there fortune, however, there was a
problem. Transcontinental transportation system was not yet in existent, and so
a prospector must take the long arduous journey by land across the vast western
rigid terrains and hostile attacks from Native Americans. But there is another
option. The second option was still long but safer route provided by the
Pacific Steamship Company. Their route involved travelling by sea to Panama,
cross the isthmus by wagons or horses, then another sea voyage from Panama to San
Francisco. Vanderbilt saw opportunity on this lucrative traffic. He knew that
if he could provide a shorter travel time for passengers, he could corner the
market. He and his partners then established the Accessory Transit Company. He
provided a shorter to California that reduced travel time by two days. His
route involved travel by sea to Nicaragua, cross the country and another sea
journey to San Francisco. Lucky for Vanderbilt, he got a charter for his
company from the Nicaraguan government and allowed him to proceed. The business
was so lucrative that Vanderbilt managed to build his own yacht, North
Star. In 1853, he announced that he would resign as president of the
Accessory Transit Company and would embark on a grand European tour aboard of
the North Star.

When Vanderbilt returned from his grand
European tour, he faced betrayal from his associates in the company. First, he
was betrayed by his appointed caretaker of his company, Joseph L. White and
Charles Morgan. The two bought out Vanderbilt from the company. When Vanderbilt
returned, he launched a swift counterattack. After few months, he bought back
his company from the two usurpers. The second act of betrayal against him was
the collusion involving another associate of his, Cornelius Garrison. Garrison
was a part of a plan to take out Vanderbilt’s ferry business in Nicaragua. This
involved Garrison and an American adventurer in Nicaragua that took power and
revoked the charter of Vanderbilt. Vanderbilt managed to take on Garrison while
the coup plotters in Nicaragua were toppled immediately. However, Vanderbilt
failed to get his charter back with the new Nicaraguan government.

Vanderbilt decided that he had enough
troubles from his large passenger liner company. He sold the Accessory Transit
Company and entered a much bigger venture. He opened a trans-Atlantic shipping
business. He competed against two dominant shipping companies, the Cunard Line
and the Collins Shipping Company. Vanderbilt started his business with only two
ships, one named the Vanderbilt. The business, however, was not lucrative as he
thought and began to sell his ships. During the Civil War, he pushed the Union
to receive his donation, the Vanderbilt, to be refitted into a battleship. The
Union accepted his donation.

During the Civil War, Vanderbilt began his
interest on the growing and profitable industry of railroads. During the late
1850's he had already began to buy railroad stocks as he saw its
potential. In 1862, Vanderbilt began to buy more railroad stocks. On the
same year, he acquired the New York-Harlem Line. Then he bought more stock and
served as a board member to several railroad companies. He then aggressively
and ruthlessly began to buy other railroad lines, such as the New York Central
Railroad in 1867.

Vanderbilt was on his way to top, however, he
would face a tough challenge from two dubious men. In 1868, Vanderbilt wanted
to own another lucrative line, the Erie Line, which connected Lake Erie to New
York. He launched a hostile takeover by buying as many stocks as he
can of the line in the New York Stock Exchange until he had the majority. This
attempt of a hostile takeover began the so-called “Erie
War.” Aggressive he might be, but the owners of the line,Jay
GouldandJames
Fiskand with the help of his
former competitorDaniel
Drew, would not allow him to succeed easily. The three issued convertible
bonds that could be exchange for stocks. As a result, with every conversion of
bonds, watered stocks were produce. On this process, with the increase of
number of stocks, Vanderbilt failed to gain the majority. Eventually,
Vanderbilt accumulated losses to about $7 million on the stock market without
even taking over of the Erie Line.

To compensate for his lost on the Erie War,
he began to extend his network of railroad lines. Some lines were
extended to the growing cities like Chicago and Cleveland. He bought the lines
in Lake Shore, as well as the Michigan Southern Railroad. In 1871, he opened
his iconic and majestic Grand Central Depot that connected the three lines of
New York-Harlem, the Hudson, and the New York Central. The Grand Central Depot
was the predecessor of today’s Grand Central Station. In 1875, he acquired the
Canadian Southern and the Michigan Central. With these two acquisitions,
Vanderbilt cemented his title as king of the railroads.

Besides railroads, the Commodore spent his
money on other things as well. Besides his luxurious yachts, he also spent
money on grandiose houses. In 1830’s he bought a mansion in New York alongside
the rich and wealthy elites of the city. However, his arrogant and brush
attitude made him an outcast. He also built a mansion in his hometown of Staten
Island. In 1873, he financed the foundation of the Nashville Central
University, which would later be renamed to Vanderbilt University.

On January 4, 1877, the Commodore Cornelius
Vanderbilt died at the age of 82. Leaving a net worth of $100,000,000, most of
which would be left to his son,William.